China-africa research initiative

LARGE, GLOBAL SUPPLY CHAIN GEESE

THE “FLYING GEESE” MODEL DESCRIBES THE MIGRATION of global production 

from higher to lower cost countries, with labor-intensive activities being the first to 

relocate. Here we found a small but significant sample of Chinese firms that have 

relocated such labor-intensive activities as garment and shoe production to Tanzania 

and Ethiopia. Although we saw no examples of this kind of “flying geese” in Nigeria or 

Ghana, other scoping studies outside our countries of focus identified a large-scale 

Chinese garment manufacturer in Madagascar (King Deer) and a Chinese company, 

Tianli, whose cotton contract farming operations in Madagascar supply its export-ori-

ented cotton spinning mill in Mauritius.

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Because of its labor-intensive nature, garment production for export is normally 

one of the earliest activities to offshore when labor costs begin to rise during structural 

transformation. Thus, garment producers are the first “flying geese” to migrate abroad. 

JDU (owner of Tanzanian subsidiary, Tooku) produced mainly in China and in Cambo-

dia prior to Tooku’s founding in 2012. Their website notes that Tanzania was chosen for 

its lower labor costs and its access to the US market through the African Growth and 

Opportunity Act (AGOA).

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 “As labor costs rose in [China and Cambodia], the company 

and its US clients—including Levi’s and Russell Brands—sought a new place for 

production, ultimately choosing Tanzania.”

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 In Ethiopia, two new firms, New Wide 

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WHAT KINDS OF CHINESE "GEESE" ARE FLYING TO AFRICA?

and C&H, produce garments for American and European markets. However, both 

relocated to Ethiopia from Kenya, not from China. 

Two large shoe factories, Huajian from China and New Wing from Hong Kong, 

decided to invest in Ethiopia to take advantage of the low labor costs, abundant leather 

supply, and incentives for duty-free entry into the United States under AGOA and also 

into the EU under the “Everything But Arms” arrangement (EBA). As production costs 

increased in China, George Shoes, whose owner is from Taiwan but with operations in 

China, also opened a new production base in Addis Ababa in 2014. All three factories 

export to the US through international shoe agents such as Solano and Brown Shoes. 

Brown Shoes was particularly influential in helping to pull these firms to Ethiopia.

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 As 

with King Deer in Madagascar, these three large factories are located in industrial 

zones that bear some resemblance to export processing zones in the first waves of 

“flying geese”. 

STRATEGIC, LOCAL MARKET-SEEKING GEESE

WE FOUND AN IMPORTANT CATEGORY OF CHINESE manufacturing in which 

entrepreneurs are designating capital for substantial import substitution investments 

targeting local markets. The firms in this category were nearly all privately owned. 

Many had previously been involved in trade, usually, but not always, exporting a 

Chinese product that they eventually began producing in Africa. Others came up with 

product ideas through market studies and consumer surveys.

Competition from imports of Chinese goods is conventionally believed to have 

decimated African manufacturing. Yet clearly, a number of the Chinese firms we 

interviewed moved to Africa because they found the import substitution opportunities 

quite attractive. Interviewed by 

China Daily in 2014, the deputy general manager of 

Hongyu Steel, a scrap metal recycler in Tanzania, explained why his firm had moved: 

Looking back at China, this industry there has a lot of competition and the 

market is also quite saturated. So there is a dire need to explore a new 

market. When you look at Africa’s economic development in the past few 

years and its regional integration, you find the demand for this product and 

the market is developing quite fast.

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Some of these strategic investors are not yet very large in terms of employment. 

Sometimes this is because their markets are still small. Xin’an, one of China’s largest 

private agrochemical producers, purchased Sunrise, a small Ghanaian agricultural 

chemicals trading company and former customer, in order to use its sales channels, 

social network, and licenses. After the acquisition in 2012, Xin’an Sunrise invested in a 

filling factory in Kumasi. Although the factory mainly adds liquid to an imported solid 

chemical base and bottles the reconstituted pesticide, transport costs were significant-

ly reduced. With only 180 employees, Xin’an Sunrise has captured 36 percent of the 

relatively modest Ghanaian market but plans to expand into the rest of West Africa. 

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Yet others are quite substantial as they employ large numbers of local workers. In 

2004, Wang Nianyong, who had been a commodities trader in Nigeria since 2000, 

founded Viju Milk, a Chinese firm that is among Nigeria’s most prominent bottled 

drink producers.

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 He decided to test the Nigerian market by importing yogurt and 

milk beverages, products that soon became popular with Nigerian children and youth. 

As of 2014, his firm was said to employ nearly 2,000 Nigerian workers. Similar in size, 

Hongda Steel in Nigeria employs some 3,500 Nigerians in its recycled steel factor while 

Rebecca Wig, manufacturing artificial hairpieces in Ghana, has around 900 local 

employees.

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OPPORTUNISTIC SMALL GEESE, TRAVELING TOGETHER

OUR FINAL CATEGORY WE CALL “small geese, traveling together.” These manufactur-

ers usually remain small-scale, cluster together in the same sector or industrial zone, 

and are often related to each other or have similar regional origins. 

In Tanzania, the original Chinese investor in plastics was a trader from Fujian. In 

2000 he noticed that local production could be made more profitable and went on to 

open the first Fujian company in Tanzania. His younger sister has a factory of similar 

size and his elder brother has a smaller one (over 100 workers) in Dar es Salaam. Later 

a friend of his cousin and then the aunt of his son in law came to invest in a plastic 

footwear factory. Flash forward to today and ten out of the 12 Chinese industrialists in 

the plastic recycling and products sector are from the coastal province of Fujian. Being 

related does not necessarily mean that these firms help each other, however. Though 

they are relatives and friends, price competition remains tied to market forces. People 

“do not care about familial relationships when it comes to business,” the trader noted 

when interviewed.

Some small firms have moved beyond their original host country to neighbors in 

the region. A Chinese entrepreneur, who had come to Ghana in 1997 as a trader, is one 

such example. After setting up a restaurant in 2003, Chen noticed that local people 

were simply burning plastic waste and saw an opportunity. In 2007, he opened the first 

plastic recycling operation, linking it to an injection-molding factory. As recycled 

plastic is in high demand as a raw material in China, it is relatively expensive to import 

into Ghana, so Chen was easily able to compete with imports. A few years later, he 

opened a plastics factory in Benin and two in Nigeria (Lagos and Abuja), with a third 

planned for northern Nigeria. 

NOT CHINESE, BUT FLYING GEESE? 

BRAUTIGAM DOCUMENTED HOW NIGERIAN TRADERS learned about manufacturing 

processes through site visits to Asian factories, later using their contacts and knowl-

edge to become industrialists themselves.

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 During the course of this research, we 

found several African firms in Nigeria that had followed such a pattern, contracting 

with Chinese experts to transfer technology and build skills in their own factories. In 

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the town of Nnewi, for example, four Nigerian manufacturing firms employed Chinese 

experts at the time of our field study, with a total of 58 Chinese and 8,297 Nigerian 

workers. Other firms had also previously employed Chinese experts for temporary 

training purposes. Some Nigerian firms had also sent staff to China for training when 

opening new product lines and in one case, six staff members were even sent to learn 

Mandarin.

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We also identified several non-Chinese firms in the leather gloves, shoes, and 

garment sectors in Ethiopia and Tanzania that had moved some labor-intensive 

production or expanded their global value chains from China to Africa. All of these 

investors brought in Chinese trainers and experts to help transfer technology and 

skills to African workers. As one Italian factory director--with 30 Chinese trainers and 

1,150 Ethiopian workers--told us: “I never stop training. It is continuous. In the begin-

ning I brought in two Italians, but they didn’t like Ethiopia; they left.”

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 In 2009, 

Mazava, a subsidiary of Winds Group, a global, high-end technical sportswear fabric 

and garment company, opened a factory in the Tanzanian city of Morogoro, which by 

2014 had over 2,000 workers. The Winds Group employed dozens of Chinese specialists 

to train their Tanzanian workers. 

CHALLENGES AND OPPORTUNITIES FOR AFRICA

BELOW, WE SUMMARIZE a set of challenges and opportunities that we see arising 

from Chinese manufacturing investment in Africa.

A. IMPORT SUBSTITUTION

ONE OF THE PERHAPS SURPRISING FINDINGS of our study was that of all the firms 

interviewed, 48% (42) were producing solely for the host country market with an 

additional 10 firms also exporting only within the region. In most, but not all, of these 

cases the companies manufactured products that substituted for imported goods. 

There are likely to be some tariff protections for these products. In plastic products, for 

example, the Chinese firms were responding to the slight advantage provided by 

protections, ranging from a 20% duty in Ghana to 25% in Tanzania and 35% in Ethio-

pia.

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 Yet these are not particularly high protections. This suggests that local African 

firms are not taking advantage of the local market potential in many of these 

countries. 

B. ADDING VALUE TO RAW MATERIALS AND LOCAL INPUTS

SOME CHINESE FIRMS WERE ADDING VALUE to raw materials through processing. In 

some cases they went on to export most or all of the products. We found this pattern 

among the tanneries in Ethiopia, a Chinese-owned sisal farm in Tanzania, and several 

textile factories that use local cotton as inputs. If we count scrap steel and waste plastic 

as “raw materials” we can also include the steel mills and plastic product factories as 

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“adding value.” None of these firms were using particularly complex technologies. The 

sisal farm’s machinery dated back to the colonial era, for example. Particularly in 

Ghana’s plastics industry, local firms have entered these sectors after learning the 

ropes from working for or supplying Chinese firms (who in some cases also sold them 

the machinery). Other foreign firms have also invested in these sectors. In Ghana, for 

example, Indian firms dominate the production of recycled steel. Yet it is likely that 

other niche opportunities exist for Ghanaian entrepreneurs to exploit. We see some 

trace evidence of this beginning to occur in the plastics sector.

C. POWER AND TRANSPORT INFRASTRUCTURE 

ALTHOUGH THE CELL-PHONE REVOLUTION has improved communications 

immensely, power and transport continue to be challenges for many firms in Africa. 

The difficulties of power and transport logistics will continue to hamper relocation 

decisions by Chinese firms, not to mention raise costs for African entrepreneurs 

thinking about investing in factories. 

Some Chinese firms have grown large enough to arrange for their own power 

grids. “To ensure smooth production and maximize the life of our machines,” the head 

of Viju Milk noted in Nigeria, “we have set up our own power grid with a local gas 

company to ensure stable power supply … If transport, including road and rail, was in 

place, costs would fall greatly, and efficiency would improve. We expect to use rail in 

the next few years.”

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 Yet poor infrastructure outside Nigeria stymied Viju Milk’s plans 

to expand into Ghana, Burkina Faso, and Togo. To attract more foreign investment and 

to encourage domestic investors, these infrastructure challenges need to be overcome.

D. INDUSTRIAL ZONES

GIVEN THE RELATIVELY POOR INFRASTRUCTURE and lack of industrial services 

available in many parts of Africa, and influenced by their own experience in China 

where industrial parks are ubiquitous, some Chinese companies have favored invest-

ment in Chinese-run industrial parks. We saw this in particular in Nigeria, where we 

interviewed eight Chinese manufacturing investments in the Ogun-Guangdong 

industrial park and six in the Calabar Park in Cross River State. Yet even in this case, as 

in Ethiopia, most Chinese industrial investments were located outside of the existing 

industrial parks and economic zones. 

Still, industrial zones offer security benefits, mentioned by several interviewees as 

a reason why co-locating increased their “comfort level.” For example, Rider Steel, a 

firm from Shandong Province, invested over US$25 million in a steel factory in Ghana’s 

Tema Export Processing Zone in 2008. The firm had also considered investing in 

Nigeria, but “Shandong has a traditional relationship with Ghana,” the general 

manager said. “The company likes to stay where other Chinese companies are.” 

E. ECONOMIC INSTABILITY AND INEFFICIENCY

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A NUMBER OF THE CHINESE FIRMS INTERVIEWED told us that economic instability 

in the region and changing prices, mainly due to shifts in commodity prices as well as 

local exchange rate shifts, created difficulties for production. Investors also believed 

that inefficiency in local government approvals and other delays exacerbated these 

problems. In Tanzania, for example, a Chinese steel company located its factory in the 

new Tanzanian government heavy industry zone in Kibaha, about 50 km from the 

commercial capital, Dar es Salaam. They commented that dealing with local bureau-

cracies was very slow: what would have taken six months in China took three years in 

Tanzania. Furthermore, the local market was not as stable as the company had 

expected. As the owner told us:

When we did market research in 2010, 12 millimeter steel rod was sold at 

US$1,100 per ton in the market, but last year the price dropped to US$760. 

And we estimate the price will come down to US$690 per ton by the end of 

the year … So the only way we can ensure our operation in this country is to 

sustain our quality and increase the productivity.

In Ghana, several firms still listed on official lists as “Chinese manufacturers” in the 

country had exited the market when their input prices rose sharply during a period of 

economic instability.

F. LABOR RELATIONS AND SAFETY 

SOME CHINESE FIRMS ENCOUNTERED SAFETY PROBLEMS and were non-compliant 

with local regulations, which in turn led to protests and strikes. For example, in 

Tanzania, Tooku experienced labor protests in 2014 and a labor strike in late 2015, 

which might have dissuaded them from further investment. We heard some feedback 

pertaining to local xenophobia toward Chinese. An industrialist in Nigeria told us that 

his company had experienced anti-Chinese sentiment: “The governments involved 

need to work on getting locals to be more welcoming. When I first came, locals on the 

street would shout, ‘Go back to China,’ when I drove down the road.”

Local workers had their own complaints about safety and Chinese non-compli-

ance with regulations created to provide protections for permanent workers. Hongxing 

Steel in Nigeria was closed several times for safety and other violations, and was even 

castigated as a “slave-driver” on Nigerian social media.

G. ENVIRONMENTAL ISSUES

WE FOUND EVIDENCE THAT SOME CHINESE FIRMS have brought technologies that 

produce more pollutants to Africa. This is not to be unexpected, as tighter environmen-

tal regulations are often a push factor for firm relocation, and China’s environmental 

restrictions are in general being enforced more vigorously. For example, Baoyao Steel 

in Nigeria bought and imported the physical assets of an old steel plant in Shanghai 

that had been shut down by the Chinese government due to tighter environmental 

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standards. We also noted that both Ghana and Tanzania continue to use plastics that 

are banned in China. For example, polypropylene bags, which are banned in China 

because they cannot be recycled, remain in production for local use in Africa. Con-

versely, the Chinese government only allows firms to produce biodegradable plastic 

bags. The machines and technicians in the polypropylene recycling sector thus found 

their way to Ghana, where PP recycling was still considered to be a progressive step.

H. IMPACT ON AFRICAN FIRMS

BASED ON OUR PRELIMINARY FINDINGS, it appears that Chinese firms may be 

competing more with imports and other foreign firms in country than with African 

manufacturers themselves. In Ghana, for example, we asked firms about their main 

competitors. Of the 21 firms that answered this question, only eight (mainly small 

plastics companies) mentioned local African firms as competitors, with the others 

naming other locally based foreign firms (Chinese, Indian, and Lebanese) or imports 

as their main competition.

I. TECHNOLOGY TRANSFER AND SKILL DIFFUSION

WE EXPLORED THE HORIZONTAL AND VERTICAL LINKAGES between Chinese firms 

and African firms, workers, and institutions, and will be reporting our observations in 

a companion paper. We observed that employment in Chinese factories is significant, 

with some 20,000 jobs generated by the companies interviewed. This translates into 

considerable diffusion of skills learned on the job, and the introduction of factory 

culture as a source of employment for young people, many of whom had likely never 

worked in factories before. However, we can summarize other potential areas of impact 

of Chinese manufacturing investment as, so far, fairly limited in terms of technology 

transferred and skills diffused to African firms.  

There are many reasons for the relatively limited linkages of Chinese factories. 

One is the relatively short time these firms have been in operation in most countries. A 

second is that firms are, in general, not forming geographic clusters in a sub-sector. We 

found only three significant clusters—plastics in Ghana and Tanzania, and leather in 

Ethiopia (although textiles may be emerging as a cluster in that country as well). 

Meanwhile, in Nigeria, we identified considerable technology transfer and 

training occurring through the market, with African firms contracting with Chinese 

suppliers to install machinery and train their workers. We also found that although 

Chinese firms do not yet show many signs of working directly with local suppliers to 

improve quality, their demand for higher quality inputs have in some cases led to 

technology upgrades by local firms. This form of learning may prove to be a more 

enduring phenomenon than inter-firm transfer in a competitive environment.

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AS WE NOTED AT THE START OF THIS PAPER, manufacturing is difficult for Chinese 

firms in these four countries. We encountered many tales of entrepreneurs opening 

factories in one business and then having to close their doors. The reasons for this 

varied. In the plastics industry in Tanzania, competition from other Chinese investors 

became intense and in one case, a plastic shoe firm closed its doors after its lease had 

risen by 300 to 400 percent. Although this entrepreneur was able to purchase his own 

land, production has yet to resume. A businessman from Taiwan opened a shoe factory 

in Ghana in 2004, using imported raw materials (artificial leather). At its peak, he 

employed about 200 Ghanaians. A decade later, due to cheaper competition from 

imports, employment had fallen to only 30 with a similar shrinkage in both production 

output and profit. 

In Ethiopia, Ghana, Nigeria, and Tanzania Chinese manufacturing firms have a 

significant and growing presence. Chinese manufacturing investors seem to be mainly 

located in the fabled “missing middle” – neither small, nor large. Yet so far, the firms 

in our study seem to primarily be replicating the experience of earlier foreign investors 

(Indian, Lebanese, and even earlier generations of Chinese from Hong Kong). Most are 

targeting local markets, substituting for imports, and hoping that reduced transporta-

tion costs and local knowledge will allow them a higher profit margin. A small but 

significant group could, perhaps, be seen as the vanguard of the flying geese – relocat-

ing to Africa to take advantage of lower costs and integrating African producers into 

global value chains. But so far, these firms are few and far between.

Some might argue that firms substituting for imports are not going to be able to 

reap the economies of scale and productivity improvements that global production 

allows. Yet we would note that African countries are presently importing some US$100 

billion in goods and services from China. Many of the Chinese firms in our study see 

capturing some of that market as feasible, even without the generous protections of an 

earlier era of import substitution. 

We expect Chinese investment in manufacturing to grow. At the December 2015 

Forum on China Africa Cooperation (FOCAC) in Johannesburg, South Africa, the 

Chinese government officially committed to assisting in African industrialization.

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 In 

general, despite the challenges outlined above, Chinese firms were optimistic about 

the opportunities for production in Africa. To close with an optimistic example of what 

could be the future of Chinese manufacturing in Africa we can look to HSJQ. HSJQ has 

invested heavily in Ghana for its two paper mills. Back in China, the company was 

operating steel plants, cement factories, wood processing plants, and other business. 

With rising production costs, overcapacity, and a saturated market in China, HSJQ told 

us that they plan to close these factories down in the next few years and relocate them 

to Africa as they have already done with their paper mills. 

★

WHAT KINDS OF CHINESE "GEESE" ARE FLYING TO AFRICA?

CONCLUSION

CHINA-AFRICA RESEARCH INITIATIVE